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The EU Pay Transparency Directive and Its Implications for Korean Companies in Europe

2026.05.14

Introduction 
 
Pay transparency has become one of the key priorities of the European Union’s gender equality agenda.  As part of the EU Gender Equality Strategy 2020–2025, the European Commission proposed binding pay transparency measures on 4 March 2021.  Following political agreement between the European Parliament and the Council, Directive (EU) 2023/970 on pay transparency was formally adopted in 2023. 
 
The Directive aims to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and reinforced enforcement mechanisms.  It entered into force in June 2023, and EU Member States are required to transpose it into national law by 7 June 2026.  
 
As the transposition deadline approaches, companies operating in the EU should prepare for significant changes in recruitment, compensation management, internal reporting, employee information rights, and potential litigation exposure. 
 
 
1. Key Features of the EU Pay Transparency Directive 
 
The Directive introduces a set of minimum requirements applicable to public and private sector employers.  Its scope covers workers with an employment contract or employment relationship, and certain obligations also apply to job applicants. 
  
First, employers must provide job applicants with information on the initial pay or pay range for the relevant position before the job interview or otherwise before the conclusion of the employment contract.  Employers are also prohibited from asking applicants about their current or previous pay history.  
 
Second, employers must make available to employees the objective and gender-neutral criteria used to determine pay, pay levels, and pay progression.  Employees will also have the right to request information on their individual pay level and the average pay levels, broken down by sex, for categories of employees performing the same work or work of equal value.  
 
Third, the Directive introduces gender pay gap reporting obligations.  Employers with 250 or more employees must report annually from 7 June 2027.  Employers with 150 to 249 employees must report every three years from 7 June 2027, while employers with 100 to 149 employees must report every three years from 7 June 2031.  
 
Fourth, where reporting reveals an average pay gap of at least 5% in any category of workers performing the same work or work of equal value, and the gap is not justified by objective, gender-neutral criteria and is not remedied within six months, the employer must conduct a joint pay assessment in cooperation with employee representatives. 
  
Finally, the Directive strengthens enforcement mechanisms.  Workers who suffer damage due to a breach of the equal pay principle may claim full compensation, including back pay, lost opportunities, non-material damage, and interest.  The Directive also provides for a shift in the burden of proof in certain circumstances, particularly where the employer has failed to comply with pay transparency obligations.
 
 
2. Slovakia: Early Implementation of the Directive 
 
Among EU Member States, Slovakia is one of the first jurisdictions to formally transpose Directive (EU) 2023/970 into national law.  On 15 April 2026, the Slovak Parliament approved the Act on Equal Pay for Men and Women for Equal Work and Work of Equal Value, which will enter into force on 7 June 2026, with existing employers required to align their internal processes by 31 July 2026.  While several Member States are still in the process of preparing or amending their national legislation, Slovakia’s early adoption provides a relatively clear indication of how the Directive will be implemented in practice. 
 
The Act closely follows the structure and substance of the Directive while providing concrete operational requirements for employers.  In particular, it introduces mandatory transparency obligations at the recruitment stage, including the disclosure of salary ranges prior to employment, a prohibition on requesting salary history, and the requirement to use gender-neutral job advertisements.  In ongoing employment relationships, employees are granted the right to request information on both their individual pay and the average pay levels of comparable roles, broken down by gender, which employers must provide within two months in a clear and accessible format. 
 
In addition, the Act establishes structured reporting obligations on gender pay gaps.  Employers with at least 100 employees must report every three years, while those with 250 or more employees must report annually, with initial reporting deadlines beginning in 2027 or 2031 depending on headcount.  Where an unjustified pay gap of at least 5% is identified and not remedied within six months, employers are required to take corrective measures in cooperation with employee representatives.  The legislation also strengthens enforcement mechanisms by expressly prohibiting retaliation, shifting the burden of proof to employers in discrimination cases, and allowing for uncapped compensation claims.  Administrative fines of up to EUR 8,000 may be imposed for non-compliance, further underscoring the need for early preparation by employers.
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3. Developments in Key Jurisdictions: Germany and Austria 
 
1) Germany 
Germany already has a Pay Transparency Act (Entgelttransparenzgesetz), which entered into force on 6 January 2018.  Under the current framework, employees in establishments with more than 200 employees may request information on pay criteria and comparative remuneration for the same or equivalent work.  However, the regime includes notable limitations, such as thresholds based on company size and comparison groups. 
 
The EU Pay Transparency Directive will significantly expand this framework.  Employees will be able to request information on their individual pay, average pay levels for comparable roles, and gender-specific breakdowns, without the current thresholds.  Recruitment practices will also change, as employers will be required to disclose salary ranges prior to employment and will be prohibited from asking about salary history. 
 
Reporting obligations are expected to broaden substantially.  While current requirements apply mainly to larger employers, the Directive will extend reporting to companies with at least 100 employees, with varying intervals depending on headcount.  Germany will also need to introduce stronger enforcement mechanisms, including damages claims, burden-of-proof rules, and potentially financial or public procurement-related sanctions. 
 
2) Austria 
Austria already has certain pay transparency obligations under the Equal Treatment Act (Gleichbehandlungsgesetz).  Job advertisements must specify the minimum remuneration applicable to the position, typically based on collective agreements or statutory rules, with the option to indicate higher pay. 
 
Employers with more than 150 employees are required to prepare income reports every two years, including gender-based data on workforce composition and average or median remuneration by job category.  These reports must be anonymised and are not submitted to public authorities but provided to employee representative bodies or made accessible internally.  A distinctive feature of the Austrian system is strict confidentiality, with administrative fines of up to EUR 360 for breaches. 
 
However, the current Austrian framework does not fully meet the requirements of the EU Pay Transparency Directive and will require adjustments.  In particular, Austria will need to expand employees’ rights to pay information, including access to individual pay levels and average pay data by gender for comparable roles.  In addition, the Directive introduces broader reporting obligations, lowering the threshold to employers with at least 100 employees and requiring more detailed disclosures on gender pay gaps. 
 
Recruitment-related transparency obligations will also become more stringent.  While Austria already requires disclosure of minimum pay, employers will need to ensure compliance with the Directive’s broader requirements, including consistent disclosure of salary ranges and stricter prohibitions on salary history inquiries. 
 
Furthermore, the Directive’s enforcement mechanisms—such as the shift in the burden of proof, enhanced compensation rights, and more effective sanctions—will likely require legislative changes beyond the current Austrian regime.  
 
 
Conclusion: Practical Implications for Korean Companies in Europe 
 
The EU Pay Transparency Directive should not be viewed merely as an HR reporting requirement.  It will require companies to review how they design salary structures, classify jobs, conduct recruitment, document pay decisions, and respond to employee information requests. 
 
For Korean companies operating in Europe, the following steps are particularly important.  
First, companies should review whether their European subsidiaries fall within the reporting thresholds, especially where headcount exceeds 100, 150, or 250 employees. 
 
Second, compensation structures should be reviewed in advance to identify unexplained gender pay differences.  Pay criteria should be documented in a clear, objective, and gender-neutral manner. 
 
Third, recruitment templates, job advertisements, interview guidelines, and HR manuals should be updated to reflect salary range disclosure obligations and the prohibition on salary history questions. 
 
Fourth, companies should prepare internal procedures for responding to employee pay information requests within the required timeframe. 
 
Finally, Korean headquarters should understand that pay transparency compliance is not merely a local administrative issue.  Once employees obtain broader access to pay information, unexplained pay differences may lead to litigation, compensation claims, regulatory sanctions, reputational risk, and employee relations issues. 
 
In this sense, the Directive represents a broader shift in European employment law: from formal equality obligations to data-driven, enforceable, and transparent pay governance.  Korean companies with European operations should therefore begin preparing before national implementing laws are finalized.

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